Hingham’s first release of debt to pay for its new middle school will carry a minuscule interest rate, which town officials are pointing to as a sign of the community’s financial strength.
Officials announced Thursday that the town will pay a 0.1995 percent interest rate on $20.3 million of bond anticipation notes, or short-term securities. The winning bid for the 12-month note was submitted by TD Securities.
The debt covers the first portion of construction for the $60.9 million Hingham Middle School as well as several smaller projects, including $200,000 for capital improvements to Lincoln School apartments, $350,000 for the middle school feasibility study, $160,000 for land acquisition for the wastewater treatment plant, and $620,000 for the fields project.
According to Town Administrator Ted Alexiades, the town had budgeted a 1 percent rate, or about $200,000 in interest. Now, the town will have to pay only $40,000.
Although that amount won’t make much difference to taxpayers, the low rate confirms the town’s hard work in maintaining its financial stability, Alexiades said.
“It is a validation of the outstanding finances and management of the town of Hingham, as evidenced by the investor community that is having a serious flight of quality,” he said. “No one wants to buy debt now unless they are sure they will be paid back in a timely fashion, and Hingham has established that at the highest level.”
The low rate stems from Hingham’s Aaa and AAA credit ratings, which are the highest possible from the three major credit-rating agencies. Hingham had to battle to keep that distinction three years ago, when Moody’s Investors Service gave a negative outlook to the town’s perfect rating.
Hingham consequently reined in spending and increased its fund balance.
“This is a clear indication of the success of that approach,” Alexiades said.
The experiences of nearby communities illustrate the value of Hingham’s policies.
In Quincy, which has a Aa3 rating from Moody’s, short-term borrowing is done at around 2 percent. Long-term borrowing has traditionally been at 4 to 5 percent. Scituate, which is rated AA by Standard & Poor’s, recently issued notes at 0.45 percent.
In Cambridge, which also has a top rating from all three agencies, long-term bonds sold for 1.64 percent.